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a. Segregation of Pledged Revenues. The BORROWER shall set aside and keep the <br /> pledged assessment revenues in an account separate from other BORROWER <br /> revenues and warrants that these revenues will not be used for any other purpose. <br /> b. Establish Security InteresT. THE BORROWER has duly executed a SECURITY <br /> AGREEMENT, attached hereto as APPENDIX 5 and incorporated herein, to provide a <br /> security interest to the CWCB in the PLEDGED REVENUES. The CWCB shall have <br /> priority over all other competing claims for said PLEDGED REVENUES, except for the <br /> liens of the BORROWER'S existing loans as listed in Section 5 (Schedule of Existing <br /> Debt) of the PROJECT SUMMARY, which sets forth the position of the lien created by <br /> this CONTRACT in relation to any existing lien(s). <br /> c. Revenue Assessments. Pursuant to its statutory authority, articles of <br /> incorporation and bylaws, the BORROWER shall take all necessary actions <br /> consistent therewith during the term of this CONTRACT to levy assessments <br /> sufficient to pay this loan as required by the terms of this CONTRACT and the <br /> PROMISSORY NOTE, to cover all expenditures for operation and maintenance and <br /> emergency repair services, and to maintain adequate debt service reserves. In <br /> the event the assessments levied by the BORROWER become insufficient to assure <br /> such repayment to the CWCB, the BORROWER shall immediately take all necessary <br /> action consistent with its statutory authority, its articles of incorporation and bylaws <br /> including, but not limited to, levying additional assessments to raise sufficient <br /> revenue to assure repayment of this loan. <br /> d. Assessment Covenant. Pursuant to its statutory authority and as permitted by <br /> law, the BORROWER shall take all necessary actions consistent therewith during <br /> the term of this CONTRACT to establish, levy and collect rates, charges and fees <br /> as described in APPENDIX 3, in amounts sufficient to pay this loan as required by <br /> the terms of this CONTRACT and the PROMISSORY NOTE, to cover all expenditures <br /> for operation and maintenance and emergency repair services, and to maintain <br /> adequate debt service reserves, including obtaining voter approval, if necessary, <br /> of increases in the BORROWER'S rate schedule or taxes, if applicable. <br /> e. Debt Service Reserve Account or Fund. To establish and maintain the debt <br /> service reserve account, the BORROWER shall deposit an amount equal to one- <br /> tenth of an annual payment into its debt service reserve fund on the due date of its <br /> first annual loan payment and annually thereafter for the first ten years of <br /> repayment of this loan. In the event that the BORROWER applies funds from this <br /> account to repayment of the loan, the BORROWER shall replenish the account <br /> within ninety (90) days of withdrawal of the funds. The debt service reserve <br /> account or fund requirement will remain in effect until the loan is paid in full. <br /> 9. Collateral The BORROWER irrevocably pledges to the CWCB, for purposes of <br /> repayment of this loan, the real property ("COLLATERAL") as further described in <br /> Section 6 (COLLATERAL) Of the PROJECT SUMMARY, authorized by the BORROWER'S <br /> AUTHORIZING RESOLUTIONS and secured by the DEED OF TRUST (APPENDIX 6) AND <br /> STOCK ASSIGNMENT(APPENDIX 7). <br /> Page 4 of 12 <br />